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Sorry, I mean the refinanced loan will be less than 80% (just) to avoid LMI 425k as opposed to 430k I think..
Hey Jamie,
Sort of… refinancing to set up IO loan on current PPOR and clear off a bunch of personal debt (so planning to split the loan). This will then facilitate a 450-500k second loan for buying a new PPOR (with an offset account). I only need 5% deposit and will be taking that from my business initially. The 1st property has about 150k of equity in it, and servicing is les than 80% across both. Have already confirmed that.
So I think should be all good. With the split though, does that 40k become P&I over full loan term, and then pay that off in preference to putting in the offset on the new PPOR, or it makes no difference which one?
Ok that also makes sense.
So in that case is there a point in splitting the loan? If I don't split the loan, the lender will just cut me a cheque for the balance and I'll use that to clear off debt, but then would have a 430k loan (I guess eating up 40-50k of potential equity headstart).
Or maybe it doesn't make a big enough difference either way on this property, and I should be more concerned about setting up the new place correctly and go from there.
So I've progressed a bit further.
Currently planning to do the following:
Refinance to a new loan as follows:
1. Current PPOR – converting to Interest Only
Split 1 – $40k
Split 2 – $380k -> this is the remaining loan balance on existing loan
2. Pre-approval for Interest Only with Offset for $500k for new PPOR to build.
I think that's correct based on my understanding of the various bits and pieces. My only question is with the non-deductible 40k split, do I pay that off over the whole term of the IO loan, or do I use a shorter term and try and pay it down faster as it's non-deductible, or do I pay that secondary as the new $500k loan would do better with that money in the Offset account?
Thanks for the advice so far all!
If my wife and I have a similar salary, and will continue to do so for the next few years, is there any particular way to structure the new purchase?
The current property is in both our names and I guess still will be after conversion to IP.
Cheers!
I think that will be the plan!
Great that makes sense. I think at this stage that money in the IP won't be used to buy the PPOR. Going forward once I have both I just need to figure out whether to pay down the PPOR, or pay down the IP as a preference. From what I've read, paying down the PPOR makes sense as it's not the investment asset?
Hi Jamie,
Currently the existing loan is P&I, and only converting to Interest Only as part of the refinance (in the next month). Will continue to live in the premise for approx 12 months more, while building a second property.
Hope that helps clarify?
Cheers!
Hi Dustin,
Current loan balance is 380 (P&I) but refinancing now to interest only at 430-ish. Will be moving out in 12 months to a new PPOR.
Cheers
